According to the independent company CreditSights, the new year looks positive, on the whole, for banks in the United States. The report also suggests that the new year will mean positive news for the job market in general.
In this new age of banking, banks will need to accommodate the new age in general: think less bank-influence, and smaller margins. Due to this, the bank returns will fall, and the focus will turn to lessening risk.
So, while the revenues will increase slowly, primarily due to regulations, the overall picture is positive. Liquidity will eventually solve the European financial troubles, and it will also help the issues in the United States. As conditions stabilize, trading will improve, and jobs will be created.
There will be a few difficulties in the growth process, including wobbly U.S. politics and an uncertain Asian market.
Another obstacle is the Volcker Rule, which will begin on July 21 of this year. Banks in the U.S. won’t be able to make money from their positions as they gain worth, or to pay traders when this happens. This will have a negative impact on U.S. traders, but a positive one on foreign traders, as the rule doesn’t apply to outside-U.S. dealings.
And while banks will have seven years to meet the requirements of Basel III, some banks could feel restrictions before then. If, by the end of 2012, banks haven’t achieved adequate percentage toward the requirements of the regulation, further restrictions will follow. Most large banks, however, seem to be at or above the requirements already, which bodes well for the year.
The CreditSights report also posits that Merrill Lynch should consider separating itself from Bank of America, since the latter has continued to struggle with mortgage, credit, and acquisition problems. Merrill Lynch, on the contrary, is hailed as a much better, stronger business and a great prospect for returns.